<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1997
REGISTRATION NO. 333-33509
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
CELERITY SYSTEMS, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5045 52-2050585
------------------- ------------------- -------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) (Identification No.)
CELERITY SYSTEMS, INC. KENNETH D. VAN METER
9051 EXECUTIVE PARK DRIVE, SUITE 302 CELERITY SYSTEMS, INC.
KNOXVILLE, TENNESSEE 37923 9051 EXECUTIVE PARK DRIVE, SUITE 302
(423) 539-5300 KNOXVILLE, TENNESSEE 37923
(Address and telephone number of principal (423) 539-5300
executive offices and principal place of (Name, address and telephone number of agent
business) for service)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
KENNETH R. KOCH, ESQ. PAUL JACOBS, ESQ.
SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP FULBRIGHT AND JAWORSKI L.L.P.
551 FIFTH AVENUE 666 FIFTH AVENUE
NEW YORK, NEW YORK 10176 NEW YORK, NEW YORK 10103-3198
TELEPHONE: (212) 661-6500 TELEPHONE: (212) 318-3000
TELECOPIER: (212) 697-6686 TELECOPIER: (212) 752-5958
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box [x]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Amendment No. 3 includes an addition to Exhibit 3.1, the Certificate of
Incorporation of Celerity Systems, Inc, which was previously filed with the
Securities and Exchange Commission. The Prospectus which forms a part of this
Registration Statement has not been changed from that included in Amendment No.
2, as filed with the Securities and Exchange Commission on October 27, 1997.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation, or an amendment thereto validly
approved by stockholders, to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or a knowing violation of a law, the payment of a dividend or
approval of a stock repurchase which is deemed illegal or an improper personal
benefit is obtained. The Company's Certificate of Incorporation includes the
following language:
"No director of the Corporation shall be liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate or limit the liability
of the director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction from
which the director derived an improper personal benefit. For purposes of the
prior sentence, the term "damages" shall, to the extent permitted by law,
include, without limitation, any judgment, fine, amount paid in settlement,
penalty, punitive damages, excise, or other tax, including, without limitation,
any of the foregoing incurred or assessed with respect to an employee benefit
plan, or expense of any nature (including, without limitation, counsel fees and
disbursements)." According to the Certificate of Incorporation, the limitations
of liability discussed in this provision cannot be limited by a modification of
the Certificate of Incorporation for acts that occurred prior to that
modification.
Article NINTH of the Certificate of Incorporation of the Company, permits
indemnification of, and advancement of expenses to, among others, officers and
directors of the Corporation. Such Article provides as follows:
"A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director, officer, employee, or
agent of the Corporation or any of its direct or indirect subsidiaries or is or
was serving at the request of the Corporation as a director, officer, employee,
or agent of any other corporation or of a partnership, joint venture, trust, or
other enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee, or agent or in
any other capacity while serving as a director, officer, employee, or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware Code, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than permitted
prior thereto), against all expense, liability, and loss (including attorneys'
fees, judgments, fines, excise or other taxes assessed with respect to an
employee benefit plan, penalties, and amounts paid in settlement) reasonably
incurred or suffered by such indemnitee in connection therewith, and such
indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
indemnitee's heirs, executors, and administrators; provided, however, that,
except as provided in Paragraph C of this Article Ninth with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation."
"B. The right to indemnification conferred in paragraph A of this Article
Ninth shall include the right to be paid by the Corporation the expenses
incurred in defending any proceeding for which such right to indemnification is
applicable in advance of its final disposition (hereinafter an "advancement of
II-1
<PAGE>
expenses"); PROVIDED, HOWEVER, that, if the Delaware Code so requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Article Ninth or otherwise."
"C. The rights to indemnification and to the advancement of expenses
conferred in paragraphs A and B of this Article Ninth shall be contract rights.
If a claim under paragraph A or B of this Article Ninth is not paid in full by
the Corporation within 60 days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by an indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Code, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Code. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware Code, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article Ninth or
otherwise, shall be on the Corporation."
"D. The rights to indemnification and to the advancement of expenses
conferred in this Article Ninth shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, this certificate of
incorporation, by-law, agreement, vote of stockholders or disinterested
directors, or otherwise."
"E. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee, or agent of the Corporation or
another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability, or loss
under the Delaware Code."
"F. The Corporation's obligation, if any, to indemnify any person who was or
is serving as a director, officer, employee, or agent of any direct or indirect
subsidiary of the Corporation or, at the request of the Corporation, of any
other corporation or of a partnership, joint venture, trust, or other enterprise
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, or other enterprise."
"G. Any repeal or modification of the foregoing provisions of this Article
Ninth shall not adversely affect any right or protection hereunder of any person
in respect of any act or omission occurring prior to the time of such repeal or
modification."
II-2
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby (items
marked with an asterisk (*) represent estimated expenses):
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 5,773
---------
Legal Fees and Expenses........................................... 100,000*
---------
Blue Sky Fees (including counsel fees)............................ 65,000*
---------
NASD Filing Fees.................................................. 2,405
---------
Listing and Nasdaq SmallCap Market fees........................... 25,020*
---------
Accounting Fees and Expenses...................................... 35,000*
---------
Transfer Agent and Registrar Fees................................. 5,000*
---------
Printing and Engraving Expenses................................... 130,000*
---------
Underwriting Non-Accountable Expense Allowance.................... 450,000
---------
Miscellaneous..................................................... 39,402*
---------
Total............................................................. $ 857,600
---------
---------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the past three years, the Registrant has made the following sales of
unregistered securities, all of which sales were exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or as
otherwise indicated herein. The following section gives effect to the
one-for-two-and-one-half reverse stock split of the Company's Common Stock
effected in August 1997.
In May 1995, the Company sold 975,836 shares of Series A Preferred Stock at
$1.55 per share (including 160,764 shares of Series A Preferred Stock sold to
Herzog, Heine & Geduld, Inc., a customer of the Company, as a result of the
conversion of a loan in the principal amount of $250,000 received from such
customer in April 1994) and warrants to purchase 408,479 shares of Series B
Preferred Stock at $1.96 per share for an aggregate purchase price of
$1,517,500, solely to accredited investors. The warrants to purchase the shares
of Series B Preferred Stock were exercised in August 1995 and the Company issued
163,392 shares of Series B Preferred Stock solely to accredited investors. The
Company believes that the issuance and sale of such securities was exempt from
registration pursuant to Section 4(2) of the Securities Act and/or Rule 506
promulgated thereunder.
In November 1995, the Company issued subordinated debt in the principal
amount of $934,500 solely to accredited investors, many of which had
participated in the previous preferred stock offerings. Such debt bore interest
at 10% per annum and, if not paid by November 30, 1996, automatically converted
to Common Stock at a rate of $4.90 per share. Purchasers of the debt received
the 1995 Warrants to purchase 190,714 shares of the Company's Common Stock for
an aggregate purchase price equal to the principal amount of the debt
($934,500). The 1995 Warrants expire on the earlier of (i) May 31, 1998 and (ii)
the closing of the Offering. Accordingly, such warrants will expire if not
exercised prior to the consummation of the Offering. The debt was automatically
converted to 190,714 shares of Common Stock in November 1996. All interest,
which had been accrued on the debt, was forgiven. The Company believes that each
issuance and sale of such securities was exempt from registration pursuant to
Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder.
In December 1995, the Company issued 17,915 shares of Common Stock to Dr.
Fenton Scruggs, a director of the Company and an accredited investor, as a
result of the conversion of a loan in the principal amount of $75,000 received
from Dr. Scruggs in November 1994. The Company believes that such issuance and
sale was exempt from registration pursuant to Section 4(2) of the Securities
Act.
II-3
<PAGE>
In June 1996, the Company, through Hampshire Securities Corporation, acting
as placement agent, issued and sold 60 units of its securities, each consisting
of 7,111 shares of Common Stock, one 10% Note in the principal amount of $50,000
and one three-year 1996 Warrant to purchase 2,625 shares of Common Stock at an
exercise price equal to $8.46 per share, at $100,000 per unit ($6,000,000 total)
solely to accredited investors. The Company believes that each issuance and sale
of such securities was exempt from registration pursuant to Section 4(2) of the
Securities Act and Rule 506 promulgated thereunder. Hampshire Securities
Corporation received, for its services, a placement fee of 8% of the gross
proceeds from the sale of such securities, a warrant to purchase 38,852 shares
of Common Stock at an exercise price of $9.44 per share, and reimbursement of
certain other expenses.
On July 15, 1997, the Company, through Hampshire Securities Corporation,
acting as placement agent, commenced the offer of 20 units of its securities,
each consisting of one 10% Note in the principal amount of $100,000 and one
four-year Warrant to purchase 16,000 shares of Common Stock at an exercise price
equal to $3.00 per share, at $100,000 per unit ($2,000,000 total) solely to
accredited investors. The Company believes that such issuance and sale of such
securities was exempt from registration pursuant to Section 4(2) of the
Securities Act and/or Rule 506 promulgated thereunder. At the closing of such
offering on August 8, 1997, Hampshire Securities Corporation received, for its
services, a placement fee of 10% of the gross proceeds from the sale of such
securities and reimbursement of certain other expenses.
The Company's currently outstanding options to purchase 129,400 shares of
Common Stock under the 1995 Plan were granted from August 10, 1995 through April
4, 1997 at exercise prices ranging from $0.10 to $4.90 per share, although
substantially all of such options are exercisable at $0.10 per share. The
Company believes that the issuance of such securities was exempt from
registration under Rule 701 under the Securities Act. In addition to the options
granted under the 1995 Plan, the Company granted to accredited investors between
April 4, 1997 and July 18, 1997 options to purchase 513,200 shares of Common
Stock outside of the 1995 Plan at exercise prices ranging from $0.10 to $3.00,
30,000 of which have been cancelled. The Company believes that each such
issuance and sale of securities was exempt from registration pursuant to Section
4(2) of the Securities Act.
II-4
<PAGE>
ITEM 16. EXHIBITS
(a) The following exhibits, unless otherwise indicated are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of Celerity Systems, Inc.
3.2 By laws of Celerity Systems, Inc.*
4.1 Form of Underwriter's Warrant*
4.2 1995 Stock Option Plan*
4.3 1997 Stock Option Plan*
4.4 Form of Stock Certificate*
4.5 Form of Bridge Warrant*
4.6 Form of 1996 Warrant*
4.7 Form of Hampshire Warrant*
4.8 Form of 1995 Warrant*
4.9 Letter Agreement dated July 15, 1997, between the Company and Mahmoud Youssefi, including exhibits*
4.10 Letter Agreement, dated July 11, 1997, between the Company and Dr. Fenton Scruggs*
5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP*
10.1 Employment Agreement, dated January 7, 1997, as amended, between the Company and Kenneth D. Van
Meter*
10.2 Employment, Non-Solicitation, Confidentiality and Non-Competition Agreement, dated as of May 1, 1996,
between the Company and Glenn West*
10.3 Termination Agreement, dated as of April 5, 1997, between the Company and Mahmoud Youssefi*
10.4 Letter Agreements, dated January 6, and October 1, 1997, between the Company and Doyal H. Hodge*
10.5 Letter Agreement, dated March 13, 1997, between the Company and William Chambers*
10.6 Letter Agreement, dated July 24, 1997, between the Company and Mark. C. Cromwell*
10.7 Exclusive OEM/Distribution Agreement, dated March 10, 1995, between the Company and InterSystem
Multimedia, Inc.*
10.8 Purchase Order Agreement, dated June 26, 1995, between Tadiran Telecommunications Ltd. and the
Company*
10.9 License Agreement, dated as of September 26, 1996, between the Company and En Kay Telecom Co., Ltd.*
10.10 License Agreement, dated as of February 21, 1997, between the Company and En Kay Telecom Co., Ltd.*
10.11 Remarketer Agreement, dated as of June 15, 1997, between the Company and Minerva Systems, Inc.*
10.12 Memorandum of Understanding, dated April 25, 1996, between Integrated Network Corporation and the
Company*
10.13 Letter of Agreement, dated March 31, 1993, between the Company and Herzog, Heine & Geduld, Inc. and
Development Agreement attached thereto*
10.14 Subcontract Agreement, dated June 26, 1997, between Unisys Corporation and the Company*
10.15 Lease Agreement for Crossroad Commons, dated November 25, 1996, as amended, between Lincoln
Investment Management, Inc., as attorney in fact for the Lincoln National Life Insurance Company, and
the Company*
11 Statement re: computation of per share earnings*
23.1 Consent of Coopers & Lybrand L.L.P
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
23.2 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained in the Opinion filed as Exhibit
5.1)*
24 Power of Attorney (included in signature page)*
24.1 Power of Attorney (included in signature page)*
27 Financial Data Schedule*
</TABLE>
- ------------------------
* Previously filed.
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information
in the registration statement;
(iii) to include any additional or changed material information on the
plan of distribution;
(2) for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of securities
offered, and the offering of such securities at that time be the initial
bona fide offering thereof; and
(3) file a post-effective amendment to remove from registration any of
the securities that remain unsold at the termination of the offering.
(d) The Registrant hereby undertakes that it will provide to the
Underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(f) The undersigned Registrant hereby undertakes that it will:
(1) for determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective; and
(2) determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered therein, and the offering
of such securities at that time as the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 3
to Registration Statement to be signed on its behalf by the undersigned, in
Knoxville, Tennessee on October 31, 1997.
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
-----------------------------------------
Name: Kenneth D. Van Meter
Title: President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 3 to Registration Statement has been signed by the following
persons in the capacities and on the dates stated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ Kenneth D. Van Meter Officer and Chairman of
- ------------------------------ the Board (Principal October 31, 1997
Kenneth D. Van Meter Executive Officer)
/s/ Thomas E. Welch * Controller (Principal
- ------------------------------ Financial and Principal October 31, 1997
Thomas E. Welch Accounting Officer)
/s/ Glenn West *
- ------------------------------ Executive Vice President October 31, 1997
Glenn West and Director
/s/ Fenton Scruggs *
- ------------------------------ Director October 31, 1997
Fenton Scruggs
/s/ Donald Greenhouse *
- ------------------------------ Director October 31, 1997
Donald Greenhouse
*By: /s/ Kenneth D. Van
Meter
-------------------------
Kenneth D. Van Meter,
Attorney-in-Fact
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of Celerity Systems, Inc.
3.2 By laws of Celerity Systems, Inc.*
4.1 Form of Underwriter's Warrant*
4.2 1995 Stock Option Plan*
4.3 1997 Stock Option Plan*
4.4 Form of Stock Certificate*
4.5 Form of Bridge Warrant*
4.6 Form of 1996 Warrant*
4.7 Form of Hampshire Warrant*
4.8 Form of 1995 Warrant*
4.9 Letter Agreement dated July 15, 1997, between the Company and Mahmoud Youssefi, including exhibits*
4.10 Letter Agreement, dated July 11, 1997, between the Company and Dr. Fenton Scruggs*
5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP*
10.1 Employment Agreement, dated January 7, 1997, as amended, between the Company and Kenneth D. Van
Meter*
10.2 Employment, Non-Solicitation, Confidentiality and Non-Competition Agreement, dated as of May 1, 1996,
between the Company and Glenn West*
10.3 Termination Agreement, dated as of April 5, 1997, between the Company and Mahmoud Youssefi*
10.4 Letter Agreements, dated January 6 and October 1, 1997, between the Company and Doyal H. Hodge*
10.5 Letter Agreement, dated March 13, 1997, between the Company and William Chambers*
10.6 Letter Agreement, dated July 24, 1997, between the Company and Mark. C. Cromwell*
10.7 Exclusive OEM/Distribution Agreement, dated March 10, 1995, between the Company and InterSystem
Multimedia, Inc.*
10.8 Purchase Order Agreement, dated June 26, 1995, between Tadiran Telecommunications Ltd. and the
Company*
10.9 License Agreement, dated as of September 26, 1996, between the Company and En Kay Telecom Co., Ltd.*
10.10 License Agreement, dated as of February 21, 1997, between the Company and En Kay Telecom Co., Ltd.*
10.11 Remarketer Agreement, dated as of June 15, 1997, between the Company and Minerva Systems, Inc.*
10.12 Memorandum of Understanding, dated April 25, 1996, between Integrated Network Corporation and the
Company*
10.13 Letter of Agreement, dated March 31, 1993, between the Company and Herzog, Heine & Geduld, Inc. and
Development Agreement attached thereto*
10.14 Subcontract Agreement, dated June 26, 1997, between Unisys Corporation and the Company*
10.15 Lease Agreement for Crossroad Commons, dated November 25, 1996, as amended, between Lincoln
Investment Management, Inc., as attorney in fact for the Lincoln National Life Insurance Company, and
the Company*
11 Statement re: computation of per share earnings
23.1 Consent of Coopers & Lybrand L.L.P
23.2 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained in the Opinion filed as Exhibit
5.1)*
24 Power of Attorney (included in signature page)*
24.1 Power of Attorney (included in signature page)*
27 Financial Data Schedule*
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CELERITY SYSTEMS, INC.
FIRST. The name of the corporation (the "Corporation") is Celerity
Systems, Inc.
SECOND. The address, including street, number, city and county of the
Corporation's registered office in the State of Delaware is 9 East Loockerman
Street, in the City of Dover, County of Kent, Delaware 19901, and the name of
the Corporation's registered agent at such address is National Corporate
Research, Ltd.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Delaware Code").
FOURTH. The total number of shares of capital stock that the Corporation
has authority to issue is (i) fifteen million (15,000,000) shares of common
stock with a par value of $0.001 per share ("Common Stock"); (ii) one million,
three hundred and eighty-four thousand and three hundred and fifteen (1,384,315)
shares of redeemable, convertible preferred stock with a par value of $0.01 per
share ("Preferred Stock"), nine hundred and seventy-five thousand and eight
hundred and thirty-six (975,836) of which shall be designated Series A Preferred
Stock and four hundred and eight thousand and four hundred and seventy-nine
(408,479) of which shall be designated Series B Preferred Stock; and (iii)
three million (3,000,000) shares of Preferred Stock with a par value of $0.01
per share (the "Designation Preferred Stock"). The Designation Preferred Stock
may be issued in one or more series, from time to time, with each such series to
have such designations, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors, subject to the limitations prescribed by law and in accordance with
the provisions hereof, the Board of Directors being hereby expressly vested with
authority to adopt any such resolution or resolutions. The authority of the
Board of Directors with respect to each such series shall include, but shall not
be limited to, the determination of fixing of the following:
(a) The distinctive designation and number of shares
constituting such series, which number may (except where otherwise
provided by the Board of Directors in creating such series) be
increased or decreased (but not below the number of shares then
outstanding) from time to time by like action of the Board of
Directors;
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(b) The dividend rate, if any, of such series or the
method of determination thereof, the conditions and times upon which
such dividends shall or may be payable, the relation which such
dividends shall bear to the dividends payable on any other class or
classes of stock or series thereof, or any other series thereof, or
any other series of the same class, and whether dividends shall be
cumulative or noncumulative;
(c) The conditions upon which the shares of such series
shall be subject to redemption by the Corporation or the holder
thereof and the times, prices and other terms and provisions upon
which the shares of the series may be redeemed;
(d) Whether or not the shares of the series shall be
subject to the operation of a retirement or sinking fund to be
applied to the purchase or redemption of such shares and, if such
retirement or sinking fund be established, the annual amount thereof
and the terms and provisions relative to the operation thereof;
(e) Whether or not the shares of the series shall be
convertible into or exchangeable for shares of any other stock of
the Corporation or any other securities and, if provision is made
for conversion or exchange, the times, prices, rates, adjustments
and other terms and conditions of such conversion or exchange;
(f) Whether or not the shares of the series shall have
voting rights in addition to the voting rights provided by law,
including whether or not the shares shall have cumulative voting
rights, and, if so, subject to the limitations hereinafter set
forth, the terms of such voting rights;
(g) The rights of the shares of the series in the event
of voluntary or involuntary liquidation or dissolution, or upon the
distribution of assets, of the Corporation; and
(h) Any other powers, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of such series,
as the Board of Directors may deem advisable and as shall not be
inconsistent with the provisions of this Certificate of
Incorporation.
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A. Common Stock
1. Relative Rights of Preferred Stock and Common Stock. All designations,
voting powers, preferences and relative participating, optional or other special
rights of, and such qualifications, limitations and restrictions on, the Common
Stock are expressly made subject and subordinate to those that are fixed with
respect to any shares of the Preferred Stock.
2. Voting Rights. Except as provided by law or this Certificate of
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by him of record on the books of the Corporation for
the election of directors and on all matters submitted to a vote of stockholders
of the Corporation. Except as otherwise expressly provided for herein or as
required by law, the holder of shares of Preferred Stock and Common Stock shall
be entitled to vote together as a single class on all matters.
3. Dividends. Subject to the rights of the Preferred Stock, the holders of
shares of Common Stock shall be entitled to receive, when and if declared by the
Board of Directors, out of the assets of the Corporation which are by law
available therefor, dividends payable either in cash, in property or in shares
of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of the Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise provided herein or by law, to receive all of the
remaining assets of the Corporation of whatever kind available for distribution
to stockholders ratably in proportion to the number of shares of Common Stock
held by them respectively. The Board of Directors may distribute in kind to the
holders of Common Stock such remaining assets of the Corporation or may sell,
transfer or otherwise dispose of all or any part of such remaining assets to any
other corporation, trust or other entity, and distribute such payment to holders
of Common Stock.
B. Preferred Stock
The designations, powers, preferences, rights and privileges of, and the
qualifications, limitations and restrictions on, the Preferred Stock are as
follows:
1. Dividends. No dividends shall be declared and set aside for any share
of the Preferred Stock; provided, however, that in the event the Board of
Directors of the Corporation shall declare a dividend payable upon the
outstanding shares of any class of Common Stock of the Corporation, other than a
dividend to which the provisions of paragraph 4(e) or (f) apply, the holders of
the Preferred Stock shall be entitled to the same amount of dividends per share
of Preferred Stock as would be declared payable on the largest number of full
shares of Common Stock into which each such share of Preferred Stock could be
converted pursuant to the provisions of Section 4 hereof, such number determined
as of the record date for the determination of holders of Common Stock entitled
to receive such
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dividend.
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, holders of outstanding shares of
Series A Preferred Stock and Series B Preferred Stock shall be entitled to be
paid out of the assets of the Corporation available for distribution to
stockholders, whether such assets are capital, surplus, or earnings, (i) an
amount equal to the greater of (x) $1.55 per share in the case of the Series A
Preferred Stock and $1.96 per share in the case of the Series B Preferred Stock,
or (y) an amount equal to the redemption price per share which would have been
payable pursuant to Section 5 had such holders of Preferred Stock been entitled
to redeem their shares as of the effective date of such liquidation, dissolution
or winding up and had elected to do so, plus (ii) all declared but unpaid
dividends accrued through the date of such payment. If upon any liquidation,
dissolution, or winding up of the Corporation, the assets to be distributed to
the holders of the Preferred Stock under the foregoing sentence shall be
insufficient to permit payment to such stockholders of the full preferential
amounts aforesaid, then all of the assets of the Corporation available for
distribution to such holders under such sentence shall be distributed to such
holders pro rata, so that each holder receives that portion of the assets
available for distribution as the maximum total preferential distribution to
such holder under the preceding sentence bears to the maximum total preferential
distribution under the preceding sentence to all holders of shares of Preferred
Stock then outstanding. After all payments shall have been made in full to all
of the holders of Preferred Stock, or funds necessary for such payments shall
have been set aside by the Corporation in trust for the account of such holders
so as to be available for such payment, any assets remaining available for
distribution shall be distributed to the holders of the Common Stock, and no
further distribution shall be made to the holders of shares of Preferred Stock.
(b) A consolidation or merger of the Corporation (including a merger or
consolidation in which the Corporation is the survivor but its Common Stock is
exchanged for stock, securities or property of another entity), or a sale of all
or substantially all of the assets of the Corporation shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of this Section 2; provided, however, that each holder of Preferred
Stock shall have the right to elect the benefits of the provision of paragraph
4(a) hereof in lieu of receiving payment in liquidation, dissolution or winding
up of the Corporation pursuant to this Section 2.
(c) In the event of a liquidation, dissolution or winding up of the
Corporation resulting in the availability of assets other than cash for
distribution to the holders of the Preferred Stock, the holders of the Preferred
Stock shall be entitled to a distribution of cash and/or assets equal in value
to the liquidation preference and other distribution rights stated in paragraph
2(a). In the event that such distribution to the holders of the Preferred Stock
shall include any assets other than cash, the following provisions shall govern.
The Board of Directors shall first determine the value of such assets for such
purpose, and shall notify all
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holders of shares of Preferred Stock of such determination. The value of such
assets for purposes of the distribution under this paragraph 2(c) shall be the
value as determined by the Board of Directors in good faith and with due care,
unless the holders of a majority of the outstanding shares of Preferred Stock
shall object thereto in writing within 15 days after the date of such notice. In
the event of such objection, the valuation of such assets for purposes of such
distribution shall be determined by arbitration in which (i) the objecting
stockholders shall name in their notice of objection one arbitrator, (ii) the
Board of Directors shall name a second arbitrator within 15 days from the
receipt of such notice, (iii) the two arbitrators thus selected shall select a
third arbitrator, and (iv) the three arbitrators thus selected shall determine
the valuation of such assets for purposes of such distribution by majority vote.
The costs of such arbitration shall be borne by the Corporation and by the
holders of the Preferred Stock (on a pro rata basis out of the assets otherwise
distributable to them) as follows: (i) if the valuation as determined by the
arbitrators is greater than 90% of the valuation as determined by the Board of
Directors, the holders of the Preferred Stock shall pay the costs of the
arbitration, and (ii) otherwise, the Corporation shall bear the costs of the
arbitration.
3. Voting Power.
(a) Except as otherwise expressly provided herein or as required by law,
the holder of each share of Preferred Stock shall be entitled to vote on all
matters. Each share of Preferred Stock shall entitle the holder thereof to such
number of votes per share as shall equal the number of shares of Common Stock
into which such share of Preferred Stock is then convertible. Except as
otherwise expressly provided herein (including without limitation the provisions
of paragraph 3(b) below and Sections 6 and 7 hereof) or as required by law, the
holders of shares of the Preferred Stock and the Common Stock shall vote
together as a single class on all matters.
(b) So long as at least 20% of the shares of the Preferred Stock
originally issued shall remain outstanding, the number of directors of the
Corporation shall be fixed at a number no greater than five, and the holders of
the Preferred Stock shall be entitled to vote as a class separately from all
other classes of stock of the Corporation in any vote for the election of
directors of the Corporation, and shall be entitled to elect voting together as
a single class, one member of the Corporation's Board of Directors, and the
other directors shall be elected by the holders of Preferred Stock and Common
Stock voting together in accordance with paragraph 3(a) above.
4. Conversion. The holders of the Preferred Stock shall have the following
conversion rights ("Conversion Rights").
(a) Right to Convert. Each share of Preferred Stock shall be convertible,
without the payment of any additional consideration by the holder thereof and at
the option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing One Dollar and Fifty-
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<PAGE>
Five Cents ($1.55) with respect to the Series A Preferred Stock, and One Dollar
and Ninety-Six Cents ($1.96) with respect to the Series B Preferred Stock, by
the applicable Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion without the payment of any additional
consideration by the holder thereof (the "Conversion Price") shall initially be
One Dollar and Fifty-Five Cents ($3.875) per share of Common Stock with respect
to the Series A Preferred Stock, and One Dollar and Ninety-Six Cents ($4.90) per
share with respect to the Series B Preferred Stock. Such initial Conversion
Price shall be subject to adjustment, in order to adjust the number of shares of
Common Stock into which the Preferred Stock is convertible, as hereinafter
provided.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon any of the following events: (i) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation to the public in which
proceeds to the Corporation, net of underwriting discounts and commissions, are
at least $5,000,000 (in the event of which offering, the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Preferred Stock
shall not be deemed to have converted that Preferred Stock until immediately
prior to the closing of such offering), or (ii) the affirmative vote or written
consent to such automatic conversion of holders of not less than seventy-five
percent of the then outstanding shares of Preferred Stock. Each person who holds
of record Preferred Stock immediately prior to such automatic conversion shall
be entitled to all dividends which have accrued to the time of the automatic
conversion, but not paid on the Preferred Stock, pursuant to Section 5 hereof.
Such dividends shall be paid to all such holders within thirty (30) days of the
automatic conversion.
(c) Mechanics of Conversion. No fractional shares of Common Stock shall be
issued upon conversion of the Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price. Before
any holder of Preferred Stock shall be entitled to convert the same into full
shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Preferred Stock, and shall give written notice to the Corporation
at such office that he elects to convert the same and shall state therein his
name or the name or names of his nominees in which he wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Preferred Stock, or to his nominee or nominees, a certificate or certificates
for the number of shares of Common Stock to which he shall be entitled as
aforesaid, together with cash in lieu of any fraction of a share. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
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<PAGE>
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section 4(d), the
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Original Issue Date" shall mean, with respect to the
Series A Preferred Stock, the date on which a share of Series A Preferred
Stock was first issued and, with respect to the Series B Preferred Stock,
the date on which a warrant to purchase shares of Series B Preferred Stock
was first issued.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock and Preferred Stock) or
other securities directly or indirectly convertible into or exchangeable
for Common Stock, but shall not include the Series B Warrants (as defined
below).
(4) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable:
(A) upon conversion of shares of Preferred Stock or upon
exercise of warrants to purchase up to 408, 479 shares of Series B
Preferred Stock (the "Series B Warrants");
(B) pursuant to the 1997 Stock Incentive Plan of the
Corporation or to officers or employees of, or consultants to, the
Corporation (not including Messrs. Glenn and Youssefi) with the approval
of the Board of Directors of the Corporation, pursuant to share options or
purchase rights for up to an aggregate of up to 482,323 shares of Common
Stock; or
(C) by way of dividend or other distribution of shares
of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing clauses (A) and (B) or this clause (C) or on
shares of Common Stock so excluded.
(ii) No Adjustment of Conversion Price. No adjustment in the number
of shares of Common Stock into which a series of the Preferred Stock is
convertible shall be made, by adjustment in the Conversion Price of such
series of Preferred Stock in respect of the issuance of Additional Shares
of Common Stock or otherwise, unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the Conversion Price for such series of
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Preferred Stock in effect on the date of, and immediately prior to, the
issue of such Additional Share.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In the event the
Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of
such number) of Common Stock issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue
or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the consideration per
share (determined pursuant to Section 4(d)(v) hereof), of such Additional
Shares of Common Stock would be less than the applicable Conversion Price
in effect on the date of and immediately prior to such issue, or such
record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the applicable Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities.
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities:
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the applicable Conversion Price computed
upon the original issue thereof (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
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(I) in the case of Convertible Securities or
Options for Common Stock the only Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the exercise
of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration actually received by the
Corporation upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Corporation (determined pursuant to Section 4(d)(v)) upon
the issue of the Convertible Securities with respect to which such Options
were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original
adjustment date, or (ii) the Conversion Price that would have resulted
from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof, no adjustment
of the Conversion Price shall be made until the expiration or exercise of
all such Options, whereupon such adjustment shall be made in the same
manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which
became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Conversion Price shall be
adjusted pursuant to this subparagraph 4(d)(iii) as of the actual date of
their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions. In
the event the Corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend or make any other
distribution of the Common Stock payable in Common Stock, or effect a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock), then and in
any such event, Additional Shares of Common Stock
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shall be deemed to have been issued:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive
such dividend or distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such dividend shall
not have been fully paid on the date fixed therefor, the adjustment
previously made in the Conversion Price which became effective on such
record date shall be canceled as of the close of business on such record
date, and thereafter the Conversion Price shall be adjusted pursuant to
this subparagraph 4(d)(iii) as of the time of actual payment of such
dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock.
In the event the Corporation shall issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4(d)(iii), but excluding Additional Shares of Common
Stock issued pursuant to Section 4(d)(iii)(2), which event is dealt with
in Section 4(d)(vi) hereof) without consideration or for a consideration
per share less than the Conversion Price of a series of Preferred Stock in
effect on the date of and immediately prior to such issue, then and in
such event, such Conversion Price of such series shall be reduced
concurrently with such issue in order to increase the number of shares of
Common Stock into which the series of Preferred Stock is convertible, to a
price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction (x) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such
issue (including shares of Common Stock issuable upon conversion of any
outstanding Preferred Stock or Convertible Securities), plus (2) the
number of shares of Common Stock which the aggregate consideration
received by the Corporation for the total number of Additional Shares of
Common Stock so issued would purchase at such Conversion Price, and (y)
the denominator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue (including shares of Common
Stock issuable upon conversion of any outstanding Preferred Stock or
Convertible Securities), plus (2) the number of such Additional Shares of
Common Stock so issued, provided that the Conversion Price shall not be so
reduced at such time if the amount of such reduction would be an amount
less than $0.01, but any such amount shall be carried forward and
reduction with respect thereto made at the time of and together with any
subsequent reduction which, together with such amount and any other amount
or amounts so carried forward, shall aggregate
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$0.01 or more.
(v) Determination of Consideration. For purposes of this Section
4(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4(d)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options
for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
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(vi) Adjustment for Dividends, Distributions, Subdivisions,
Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions. In the
event the Corporation shall issue Additional Shares of Common Stock
pursuant to Section 4(d)(iii)(2) in a stock dividend, stock distribution
or subdivision, the Conversion Price in effect immediately prior to such
stock dividend, stock distribution or subdivision shall, concurrently with
the effectiveness of such stock dividend, stock distribution or
subdivision, be proportionately decreased.
(2) Combinations or Consolidations. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Price in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(vii) Adjustment for Merger or Reorganization, etc.
In case of any consolidation or merger of the Corporation with or
into another corporation or the conveyance of all or substantially all of
the assets of the Corporation to another corporation, each share of
Preferred Stock shall thereafter be convertible into the number of shares
of stock or other securities or property to which a holder of the number
of shares of Common Stock of the Corporation deliverable upon conversion
of such Preferred Stock would have been entitled upon such consolidation,
merger or conveyance, and, in any such case, appropriate adjustment (as
determined by the Board of Directors) shall be made in the application of
the provisions herein set forth with respect to the rights and interest
thereafter of the holders of the Preferred Stock, to the end that the
provisions set forth herein (including provisions with respect to changes
in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of
stock or other property thereafter deliverable upon the conversion of the
Preferred Stock.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation but will at all times in good faith assist in the carrying
out of all the provisions of this Section 4 and in the taking of all the
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
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adjustment or readjustment of the Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish
to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Price at the time
in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of Preferred Stock.
(g) Notice of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends
paid in previous quarters) or other distribution, the Corporation shall
mail to each holder of Preferred Stock at least ten (10) days prior to the
date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the Preferred Stock.
5. Redemption. The Corporation shall redeem outstanding shares of
Preferred Stock pursuant to the request of the holders thereof in accordance
with the following provisions:
(a) Any holder of shares of Preferred Stock of any series may
request redemption of, on or after April 1, 2000, (the "Redemption Date"), that
number of shares as equals all or any part of the shares of Preferred Stock then
held by him that remain outstanding, by giving written notice to the Corporation
at least 120 days prior to the Redemption Date stating in such notice the number
of shares to be redeemed. On the Redemption Date the Corporation shall redeem
all shares as to which it has received requests for redemption from the holders
thereof in accordance with the foregoing. Any redemption hereunder shall be at
the redemption price set forth in paragraph 5(c). In the event that redemption
pursuant to this Section 5 shall be unlawful in whole or in part for any reason,
the obligation of the Corporation to make such redemption shall continue in
effect without restriction as to date or year until such time or times as such
redemption (or any portion thereof not yet made) shall no longer be unlawful,
and the Corporation shall promptly make such redemption at such time as it
becomes lawful, to the extent that it is lawful at that time.
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(b) In the event of the occurrence and declaration of any Event of
Default (as defined in paragraph 6(a)), the Corporation shall promptly notify
each holder of Preferred Stock then outstanding, that such holder shall be
entitled to redeem, subject to the provisions of this paragraph 5(b), all or any
part of such holder's shares of Preferred Stock on the date 120 days following
the date of such notice. Any redemption under this paragraph 5(b) shall be at
the redemption price set forth in paragraph 5(c). To exercise its option
hereunder any holder of Preferred Stock shall give the Corporation written
notice specifying the number of shares to be redeemed at least 30 days prior to
the date fixed for redemption, and shall present and surrender the certificate
or certificates for such shares (duly endorsed for transfer) to the Corporation
at its principal office and thereupon the redemption price of such shares shall
be paid to, or to the order of, the person whose name appears on such
certificate or certificates as the owner thereof; provided, however, that the
Corporation shall redeem shares of Preferred Stock hereunder only to the extent
permitted by law, and if not all of the shares otherwise redeemable hereunder
can be redeemed, redemptions shall be made on a pro rata basis in the same
manner as set forth in paragraph 5(a).
(c) The redemption price per share of Series A Preferred Stock
redeemed pursuant to this Section 5 shall be $1.55, and the redemption price per
shares of Series B Preferred Stock redeemed to this Section 5 shall be $1.96,
the amount per share increasing on the first day of each April after April 1,
1995, by 12.00% annually (prorated for any redemption on a date other than April
1 and subject to appropriate adjustment for stock splits, reverse stock splits
and similar recapitalization affecting the Preferred Stock).
(d) Each holder of shares of the Preferred Stock to be redeemed
shall surrender the certificate or certificates representing such shares to the
Corporation at the principal office of the Corporation or such other place
designated in writing by it, and thereupon the applicable redemption price for
such shares as set forth in this Section 5 shall be paid to the order of the
person whose name appears on such certificate or certificates and each
surrendered certificate shall be canceled and retired. If the number of shares
represented by the certificate or certificates surrendered shall exceed the
number of shares to be redeemed, the Corporation shall issue and deliver to the
person entitled thereto a certificate or certificate representing the unredeemed
balance of such shares.
6. Crisis Voting Rights.
(a) If any one or more of the following events shall occur and be
continuing, that is to say: (i) if any amount required to be paid pursuant to
paragraph 5(a) or 5(b) hereof are not paid within 15 days after the dates such
payments are due; (ii) if the Corporation or any of its subsidiaries shall (a)
admit in writing its inability to pay its debts generally as they become due,
(b) file a petition or answer a consent seeking relief under the Federal
Bankruptcy Code, as now constituted or hereafter amended, or any other
applicable Federal or state bankruptcy or insolvency law or other similar law,
(c) consent to the institution of proceedings under any law listed in (b) above,
or to the filing of any such petition or to the appointment or taking possession
or a receiver, liquidator, assignee, trustee,
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custodian (or other similar official) of the Corporation or any such subsidiary
or of any substantial part of their property, (d) fail generally to pay its
debts as such debts become due, or take corporate action in furtherance of any
such action, or (e) make an assignment for the benefit of its creditors; (iii)
if a decree or order shall be entered by a court for relief in respect of the
Corporation or any of its subsidiaries under the Federal Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable Federal or state
bankruptcy or insolvency law or other similar law, or appointing a receiver,
liquidator, assignee, trustee (or similar official) of the Corporation or any
such subsidiary or of any substantial part of their property or ordering the
winding-up or liquidation of their affairs and such decree or order shall not be
vacated or set aside or stayed within a period of 60 days from the date of entry
thereof; or (iv) if default shall be made in the performance or observance by
the Corporation of any material condition, agreement, covenant or obligation set
forth in Section 4 or 6 of the Stock Purchase Agreement among the Corporation
and holders of the Series A Preferred Stock dated as of the date of purchase of
the shares of Series A Preferred Stock (the"Purchase Agreement"), or in this
Certificate of Incorporation or the by-laws of the Corporation, and such default
is not cured within 30 days following notice thereof from any holder of
Preferred Stock (or if such default is of a nature not capable of being cured
within 30 days, the Corporation has not commenced and is not pursuing with due
diligence curing such default), then, and in each and every case, the holders of
not less than a majority in interest of the Preferred Stock may by vote at a
meeting of stockholders or by written notice to the Corporation, declare the
Corporation to be in default hereunder ("Event of Default") whereupon: (A) if
such holders shall so specify in such vote or notice, all of the Preferred Stock
shall immediately become redeemable and shall be redeemed by the Corporation in
accordance with the provisions of paragraph 5 (b) hereof; and (B) if less than
80% of the outstanding Preferred Stock is redeemed under paragraph 5(b), the
holders of Preferred Stock shall have the right, voting as a class separately
from all other classes of the Corporation, to elect a number of directors of the
Corporation which would entitle such holders to elect a majority of the members
of the Corporation's Board of Directors, the remaining directors to be elected
by the other classes of stock entitled to vote therefor. If and when such right
of the holders of the Preferred Stock becomes operative, the maximum authorized
number of members of the Board of Directors of the Corporation shall
automatically be increased to the extent necessary to create such number of
vacancies, to be filled only by vote of the holders of the Preferred Stock then
outstanding as hereinabove set forth, as are required to permit the holders of
the Preferred Stock to elect a majority of the members of such Board of
Directors. Whenever such right of the holders of the Preferred Stock shall
become operative, such right shall be exercised initially either at a special
meeting of the holders of the Preferred Stock called as provided in paragraph
6(b) hereof or at any annual meeting of stockholders held for the purpose of
electing directors, and thereafter at such annual meetings. In electing
directors to be elected by the holders of the Preferred Stock pursuant to this
Section 6, each share of Preferred Stock shall be entitled to the number of
votes determined as provided in paragraph 3(a) hereof. The right of the holders
of the Preferred Stock voting together as a class separately from all other
classes of stock, to elect the members of the Board of Directors of the
Corporation as aforesaid, shall continue until such time as the Event of
Default shall have been cured, at which time the right of the holders of the
Preferred Stock to vote for directors
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shall be reduced to one director, as provided for in paragraph 3(b) hereof
(subject to becoming operative again upon the occurrence of a subsequent Event
of Default) and the maximum authorized number of members of the Board of
Directors of the Corporation shall automatically be reduced if such number was
increased at the time when the terminated voting right of the holders of the
Preferred Stock became operative.
(b) At any time when voting right of the holders of the Preferred
Stock provided in paragraph 6(a) above shall have become operative and not have
been exercised, a proper officer of the Corporation shall, upon the written
request of the holders of record of at least 20% of the shares of Preferred
Stock then outstanding addressed to the secretary of the Corporation, call a
special meeting of the holders of the Preferred Stock for the purpose of
electing the additional director or directors to be elected by the holders of
the Preferred Stock. Such meeting shall be held at the earliest practicable date
upon the notice required for meetings of stockholders at such place in the
continental United States as may be specified in such written request. If such
meeting shall not be called by the proper officer of the Corporation within 20
days after the personal service of such written request upon the secretary of
the Corporation, or within 20 days after mailing the same within the United
States by registered or certified mail enclosed in a postage-paid envelope
addressed to the secretary of the Corporation at its principal office, then the
holders of record of at least 20% of the shares of Preferred Stock then
outstanding may designate in writing one of their number to call such meeting at
the expense of the Corporation, and such meeting may be called by the person so
designated upon the notice required for annual meetings of stockholders and
shall be held at such place in the continental United States as may be specified
in such notice.
(c) Upon any termination pursuant to paragraph 6(a) of the right of
the holders of the Preferred Stock to vote for directors as provided by
paragraph 6(a) above, the term of office of any director then in office elected
by the Preferred Stock pursuant to such paragraph shall terminate immediately.
If the office of any director elected by the holders of the Preferred Stock
becomes vacant by reason of death, resignation, retirement, disqualification,
removal from office or otherwise, then subject to the procedures provided for in
paragraph 6(b) above, the vacancy shall be filled by a person nominated by the
remaining directors designated by the holders of the Preferred Stock entitled to
vote for such director.
7. Restrictions and Limitations. As long as at least 20% of the
shares of Preferred Stock originally issued shall remain outstanding, the
Corporation shall not, without the vote or written consent of the holders of
seventy-five percent (75%) in voting power of the then outstanding shares of the
Preferred Stock, voting together in accordance with paragraph 3(a) hereof:
(i) Redeem, purchase or otherwise acquire for value (or pay into or
set aside for a sinking fund for such purpose), any share or shares of Preferred
Stock, other than pursuant to Section 2 or 5 hereof;
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(ii) Purchase, redeem or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any of the Common Stock of any class or any
other capital stock of the Corporation (other then the Preferred Stock):
provided, however, that this restriction shall not apply to the repurchase of
shares of Common Stock issued pursuant to employee stock purchase or stock
option plans or subject to stock repurchase agreements, provided that (unless
the purchase is approved by the unanimous vote of the Board of Directors of the
Corporation ) the repurchase price paid by the Corporation does not exceed the
purchase price paid by such employee, pursuant to restrictive stock purchase
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, including the termination of employment;
(iii) Authorize or issue, or obligate itself to issue, any
additional shares of Preferred Stock or any other equity security senior to or
on a parity with the Preferred Stock as to liquidation preferences, dividend
rights or voting rights:
(iv) Increase or decrease (other than by issuance, redemption, or
conversion as permitted herein) the total number of authorized shares of
Preferred Stock;
(v) Authorize any merger or consolidation of the Corporation with or
into any other corporation or entity (except with or into a wholly-owned
subsidiary of the Corporation ), or authorize the sale of substantially all of
the assets of the Corporation: or
(vi) Amend this Certificate of Incorporation or the by-laws of the
Corporation in any manner which adversely affects the preferences, voting
powers, qualifications, rights and privileges of any series of Preferred Stock.
8. No Reissuance of Preferred Stock. No shares of the Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such shares shall be canceled, retired,
and eliminated for the shares which the Corporation shall be authorized to
issue. The Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Preferred Stock accordingly.
9. Notices of Record Date. In the event (i) the Corporation
establishes a record date to determine the holders of any class of securities
who are entitled to receive any dividend or other distribution, or (ii) there
occurs any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation and any transfer of all or substantially all of
the assets of the Corporation to any other corporation, or any other entity or
person, or any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the Corporation shall mail to each holder of Preferred Stock
at least twenty (20) days prior to the record date specified therein, a notice
specifying (a) the date of such record date for the purpose of such dividend or
distribution and a description of such dividend or distribution, (b) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger,
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dissolution, liquidation or winding up is expected to become effective, and (c)
the time, if any that is to be fixed, as to when the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for securities or other property deliverable upon
such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.
10. Other Rights. Except as otherwise provided in this Certificate
of Incorporation, shares of Preferred Stock and shares of Common Stock shall be
identical in all respects (each share of Preferred Stock having equivalent
rights to the number of shares of Common Stock into which it is then
convertible), shall have the same powers, preferences and rights, without
preference of any such class or share over any other such class or share, and
shall be treated as a single class of stock for all purposes.
FIFTH. The name and mailing address of the incorporator is Kenneth R.
Koch, Esq., Squadron, Ellenoff, Plesent and Sheinfeld, LLP, 551 Fifth Avenue,
New York, NY 10176.
SIXTH. Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
SEVENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
EIGHTH. The Board of Directors is expressly authorized to adopt, amend or
repeal the by-laws of the Corporation except as and to the extent provided in
the by-laws.
NINTH. A. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the Corporation or any of its direct or indirect
subsidiaries or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of any other corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving as
a director, officer, employee, or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware Code, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than permitted prior thereto), against all
expense, liability, and loss (including attorneys' fees, judgments, fines,
excise, or other taxes assessed with respect to an employee benefit plan,
penalties, and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection
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therewith, and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the indemnitee's heirs, executors, and administrators; provided,
however, that, except as provided in Paragraph C of this Article Ninth with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.
B. The right to indemnification conferred in Paragraph A of this
Article Ninth shall include the right to be paid by the Corporation the expenses
incurred in defending any proceeding for which such right to indemnification is
applicable in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Delaware Code so requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Article Ninth or otherwise.
C. The rights to indemnification and to the advancement of expenses
conferred in Paragraphs A and B of this Article Ninth shall be contract rights.
If a claim under Paragraph A or B of this Article Ninth is not paid in full by
the Corporation within 60 days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by an indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Code, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Code. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware Code, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of
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conduct or, in the case of such a suit brought by the indemnitee, be a defense
to such suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article Ninth or
otherwise, shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article Ninth shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, this certificate of
incorporation, by-law, agreement, vote of stockholders or disinterested
directors, or otherwise.
E. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee, or agent of the Corporation
or another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability, or loss
under the Delaware Code.
F. The Corporation's obligation, if any, to indemnify any person who
was or is serving as a director, officer, employee, or agent of any direct or
indirect subsidiary of the Corporation or, at the request of the Corporation, of
any other corporation or of a partnership, joint venture, trust, or other
enterprise shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
or other enterprise.
G. Any repeal or modification of the foregoing provisions of this
Article Ninth shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
TENTH. No director of the Corporation shall be liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary duty as
a director, provided that this provision does not eliminate or limit the
liability of the director (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any
transaction from which the director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include, without limitation, any judgment, fine, amount paid
in settlement, penalty, punitive damages, excise, or other tax, including,
without limitation, any of the foregoing incurred or assessed with respect to an
employee benefit plan, or expense of any nature (including, without limitation,
counsel fees and disbursements). Each person who serves as a director of the
Corporation while this Article TENTH is in effect shall be deemed to be doing so
in reliance on the provisions of this Article TENTH, and neither the amendment
or repeal of this Article TENTH, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article
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TENTH, shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for, arising out of, based upon, or in
connection with any acts or omissions of such director occurring prior to such
amendment, repeal, or adoption of an inconsistent provision. The provisions of
this Article TENTH are cumulative and shall be in addition to and independent of
any and all other limitations on or eliminations of the liabilities of directors
of the Corporation, as such, whether such limitations or eliminations arise
under or are created by any law, rule, regulation, by-law, agreement, vote of
stockholders or disinterested directors, or otherwise.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Incorporation the 12th day of August, 1997.
/s/ Kenneth R. Koch, Esq.
-----------------------------------
Kenneth R. Koch, Esq., Incorporator
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EXHIBIT 3.1
CERTIFICATE OF CORRECTION
OF CELERITY SYSTEMS, INC.
Celerity Systems, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
1. The name of the corporation is Celerity Systems, Inc.
2. That a Certificate of Incorporation (the "Certificate") was filed by
the Secretary of State of the State of Delaware on August 12, 1997 and that said
certificate requires correction as permitted by subsection (f) of section 103 of
The General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said certificate to be corrected is as
follows: The Section Fourth(B)(4)(a) of the Certificate inaccurately stated in
words the conversion prices of the Series A and Series B Preferred Stock, which
are accurately stated in numbers.
4. Section Fourth(B)(4)(a) is corrected to read as follows:
"4. Conversion. The holders of the Preferred Stock shall have the
following conversion rights ("Conversion Rights").
(a) Right to Convert. Each share of Preferred Stock shall be convertible,
without the payment of any additional consideration by the holder thereof and at
the option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing One Dollar and Fifty-Five Cents ($1.55) with
respect to the Series A Preferred Stock, and One Dollar and Ninety-Six Cents
($1.96) with respect to the Series B Preferred Stock, by the applicable
Conversion Price, determined as hereinafter provided, in effect at the time of
conversion. The Conversion Price at which shares of Common Stock shall be
deliverable upon conversion without the payment of any additional consideration
by the holder thereof (the "Conversion Price") shall initially be Three Dollars
and Eighty-Seven and One-Half Cents ($3.875) per share of Common Stock with
respect to the Series A Preferred Stock, and Four
<PAGE>
Dollars and Ninety Cents ($4.90) per share with respect to the Series B
Preferred Stock. Such initial Conversion Price shall be subject to adjustment,
in order to adjust the number of shares of Common Stock into which the Preferred
Stock is convertible, as hereinafter provided."
IN WITNESS WHEREOF, the Corporation has has caused this certificate to be
signed by Kenneth D. Van Meter, president and CEO, this 30th day of October,
1997.
Celerity Systems, Inc.
By /s/ Kenneth D. Van Meter
---------------------------------------------
Name: Kenneth D. Van Meter
Title: President and Chief Executive Officer
- 2 -
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 of
our report dated March 7, 1997, except for Notes 1 and 16, for which the date is
August 8, 1997, on our audits of the financial statements of Celerity Systems,
Inc. as of December 31, 1996 and for each of the two years in the period ended
December 31, 1996. We also consent to the references of our firm under the
captions "Experts," "Summary Financial Data" and "Selected Financial Data."
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
October 31, 1997
